Legal

GENERAL:
The acquisition of property in Thailand can involve a significant investment and with this considerable time, thought and legal advise should be taken as well.
Whether you are purchasing or selling a property each party should take into consideration the legal requirements of Thailand regarding property ownership.
Due diligence for every transaction is always recommended. This ensures that all parties understand the structure of various titles and ownership and implications of any agreements that may be formed in the transaction process.
For foreigners wishing to invest in Thailand , laws are quite clear, but they need to be well understood and followed. A professional legal team should be appointed to act in your interests and guide you through the process.
First of all, all potential buyers should engage a professional reputable legal firm that specializes in Thai Property / Real Estate law and ensure that they check the agreements and confirm their legality and the buyers rights under the agreement. Thorough due diligence on the contracts, titles and owners is essential and must be carried out by a qualified layer on behalf of the buyer
LEGAL PROCESS:
Phuket ABC Real Estate has a property portfolio comprising of luxury properties, villas, condominiums, resorts and land plots. When considering investing in such properties, a general knowledge of the ownership and investment rules in Thailand in relation to foreign interests in property is essential. Such general principles need to be explained in practical terms so that when seeking legal advice you are prepared with basic information before being provided with the details on how best to proceed. The following is of course not advice but a guide as to the general information a purchaser should understand when reviewing information opportunities in Thailand :
Title
Ownership methods
Contracts and legal structures of purchase/development
Construction and Project Management
TITLE:
Most legal articles on title in transfer comprise a breakdown on the definitions of stages of title and a technical description of their legal meaning. However, there is a simple approach to title which can be applied to premium class real estate:
Land' titles known as “Chanote”, “Nor Sor 3 Gor” or even “Nor Sor Gor” may be acceptable titles for purchase, subject to due diligence by your legal advisers. Chanote is the ultimate land title and is deemed to be secure but an investigation is necessary to actually check if the titles preceding Chanote (the history of the Chanote) were issued legally, not subject to disputes and not in public restricted land.
A condominium may only be registered upon and built on “Chanote” title, whereas the unit itself will require a ‘Or Chor 2' title issued in the owners name, and if purchased under the foreign freehold quota a letter from the juristic person confirming that the unit has been registered within the quota confirming foreign freehold ownership is confirmed.
When land was first registered by Thais the registration typically related to a possessory right known as “Sor Kor 1” although there are other rarer types of title from which Chanote can originate. The documents relating to this original right are key to confirming the legality of the title and should be checked by your lawyer.
Nor Sor 3 Gor and Nor Sor 3 land can be bought and sold without the strict need to upgrade to Chanote. Chanote means that the land is (most of the time but not always) absolutely defined in terms of boundaries and size.
A conclusive title report and legal opinion that the title is clear should be issued before committing large sums of money to a purchase, unless the risk is viewed in terms of your wealth as nominal.
OWNERSHIP METHODS:
Whilst there are several ways of purchasing property as a foreigner in Thailand , there are three principal methods available to foreign buyers to purchase:
1. Purchase a direct foreign freehold condominium title in your name (this would fall within a quota of 49% of the total area of the condominium units which are permitted under Thai law to be sold directly to foreigners).
2. Purchase a condominium or landed property using a Thai company in which the foreign shareholdings have a controlling protected 49% interest with weighted voting rights. This company cannot be a “nominee” company and must comply with Thai company set-up/structure laws (read below). If it is a condominium the unit can be part of the 51% required to be owned by Thai.
3. Purchase either a condominium or a landed property via a standard 30-year lease agreement (this being the maximum legally allowable lease contract period recognized under Thai law). Purchasers can request for a further two, 30-year renewable options on the expiry of the 1st 30-year period but the Thai Land / Property Registry Department only recognizes the initial 30-year lease period. Numerous structures exist where the leasehold owners hold an interest in the “landlord” company granting the renewals to protect the security of the renewals.
Foreigners are restricted from using Thai nominee or proxy shareholders partners in the formation of a Thai company for the purpose of purchasing property. The use of nominees is illegal and will lead to unlawful foreign land ownership.
Those worried about Thai companies and their legitimacy when investing in property should bear in mind that Thai companies, as in other jurisdictions, should be compliant in respect of the accounting, tax and legal rules of Thailand . This carries an annual fee that in proportion to the typical value of investment is nominal.
LEASE OWNERSHIP:
Leases must be scrutinized for security of investment: termination provisions; assignment and transfer provisions (re-sale ability); enforceability of renewals. Inheritance issues must also be considered and the most reliable way of avoiding such issues is to own a lease in a company so that the shares in the company which owns the lease will pass to beneficiaries, as opposed to your beneficiaries being required to attempt to re-register a lease in their name. If possible, beneficiaries can also be added as co-lessees in the agreement as the rights are similar to that of joint tenancies. This means that the rights to the lease are passed on to the surviving lessee automatically.
Some of the clauses a buyer may wish to ensure are covered or at least clarified within their lease agreement are as follows.
1) Your right to buy the land or have the lease period extended in line with any future changes to the law regarding foriegner lease / purchase conditions.
2) Your ability to sub-let or transfer your lease rights to another person that also covers your ability to 'sell'.
3) Your right to have more than one (several) names of those who you wish to continue the lease in the event of your death they are able to continue the lease automatically without the need for the landowner to attend land office.
4) Succession (Inheritance) - Rights of transfer to your heirs in event of your death.
5) Building/s - Your right of ownership and registration in your own name at the relevant land office of the buildings (structures) built upon the land (property).
6) Ideally the land lease and sales and purchase agreement for all the dwellings/structures should be on separate contracts that refer to the other.
7) Written confirmation that the Lessor/Land owner agrees not to mortgage, loan against the land.
8) Land owner agrees that they can only sell the land if a new buyer also enters into the full continuing lease agreement with you with the same terms and conditions.
9) Alternatively have agreement with the Lessor/Landowner that if you wish to sell that the Lessor/Landowner agrees to terminate the exisiting lease and register a new 30 year lease with the new owner if you wish to.
10) Have a concurrent agreement regarding the extension/re-newal of the 30 year lease extensions whilst not being enforceable under the Lease agreement confirm both parties to extend.
11) Confirmation of land plot size / location / title deed / Chanote authenticity and registered lawful owners.
12) Formal registration of the lease agreement with the Land Dept.
Transfer of funds into Thailand for the purchase of Property
Foreign exchange transaction forms (FET) should be obtained from the recipient bank account when transferring funds to purchase or invest in property in Thailand. This is required even if it is to purchase a leasehold right. If there are co-lessees in the agreement, each lessee must have separate forms equivalent to their vested interest in the property. Additionally, records of transfer from the source country should be retained and all transfers marked as being for the purpose of “investment in Thailand”. Provided the correct taxes and regulatory requirements are adhered to, monies can later on be taken out of Thailand.
CONTRACTS AND LEGAL STRUCTURES OF PURCHASE/INVESTMENT:
Initially, you should be presented with a reservation contract. Provided the terms are fair and the seller reputable, a small reservation fee/deposit is reasonable to secure a property subject to refund in the event the title of the property is not clear or reasonable terms of purchase cannot be agreed prior to agreeing and signing the purchase and or lease agreements. Risk averse buyers can simply await due diligence and the outcome of negotiation without securing their desired property if preferred.
In a standard conveyance, most purchasers expect to see one sales/purchase contract which in a premium development would be accompanied by rules and regulations of an estate and perhaps a share purchase agreement to subscribe to shares in an owner-controlled management company.
However, in a purchase in Thailand, you may expect to receive these documents but perhaps some other contracts: In a lease purchase you may receive an agreement to purchase shares in a central land owning Thai company; In a purchase involving offshore entities providing services to the estate in which you are buying, you may receive a share purchase agreement relating to shares in an offshore entity.
In a condominium purchase, you may receive a set of rules referred to as the “Condominium Rules” which are prescribed by law which may supplement the rules relating to the common areas (landscaped gardens; clubhouse; play area) surrounding the condominium used by other types of owners in the project such as villa owners. You may be presented with a master agreement, which links all of your contracts together and stipulates a timeframe under which certain key events in your purchase, especially if an off-plan purchase, should occur: staged payments; transfer of shares; transfer of legal title; registration of lease. Sometimes a master agreement can assist, if drafted succinctly in providing a purchaser with a clear overview of the transaction. If a management company is appointed in the first instance by a developer or seller, you may be supplied with the relevant contracts.
The importance of these contracts long term can be extremely important in investment and residential property as rising costs of management can erode into your projected rental income returns or your disposable income. Rental pool schemes can vary in complexity and so can the contracts reflecting terms. At the sales process, the rental pool income guarantee (if one is provided) should be compared with the provisions in the contract to assess whether there are any potential deductions from the rental income profit which have not been identified. Exclusive resorts may make their rental pool schemes exclusive for a period of time which begs the question, what happens after the term of management of the scheme expires. Finally, if you are buying into a special class of development such as a marina development, golf-course development or exclusive resort style development there should be a set of membership rules and terms supplementing your purchase contracts. If this is the key reason for your purchase and/or a significant factor in relation to potential re-sale, scrutiny of the terms such as assign ability; change of control of management; exclusion/termination provisions should be conducted.
Construction and Project Management
In relation to off plan purchases involving construction whether contracting directly with the construction company, through the seller or with the assistance of a project manager, review of the contractual relationship, risk and remedies for breach is necessary. Points some readers will be familiar with equally apply in Thailand.
Independent structural surveys are worth considering to supplement project management. The length of structural and non-structural defects guarantees will provide a clue to the quality of construction or at least the maximum length of time the builder is willing to guarantee work.
If construction costs are separate to the purchase price of the property under the purchase contract then there should be a cap on costs to prevent mismanagement of budget. Careful consideration to ensuring that contractors are not starved of funds resulting in delay must also be taken.
If project managers obtain a percentage of construction costs and construction costs are not fixed there should be examination as to what incentives there are placed upon the project manager to ensure that costs are maintained at appropriate levels.
Construction is a matter that requires swift resolution in relation to potential disputes. The courts are not speedy enough to resolve disputes in time to prevent loss of capital appreciation profit or prevent escalating construction costs during a dispute period rising and detracting from profits. Therefore, good dispute resolution provisions are necessary.
Payments are typically paid in accordance with construction milestones. The mechanisms for assessing whether certain percentages of the construction process have been completed should be clear at the outset and the trigger for payments will correspondingly be clear.
CONSTRUCTION AND PROJECT MANAGEMENT:
In relation to off plan purchases involving construction whether contracting directly with the construction company, through the seller or with the assistance of a project manager, review of the contractual relationship, risk and remedies for breach is necessary. Points some readers will be familiar with equally apply in Thailand.
Independent structural surveys are worth considering to supplement project management. The length of structural and non-structural defects guarantees will provide a clue to the quality of construction or at least the maximum length of time the builder is willing to guarantee work.
If construction costs are separate to the purchase price of the property under the purchase contract then there should be a cap on costs to prevent mismanagement of budget. Careful consideration to ensuring that contractors are not starved of funds resulting in delay must also be taken.
If project managers obtain a percentage of construction costs and construction costs are not fixed there should be examination as to what incentives there are placed upon the project manager to ensure that costs are maintained at appropriate levels.
Construction is a matter that requires swift resolution in relation to potential disputes. The courts are not speedy enough to resolve disputes in time to prevent loss of capital appreciation profit or prevent escalating construction costs during a dispute period rising and detracting from profits. Therefore, good dispute resolution provisions are necessary.
Payments are typically paid in accordance with construction milestones. The mechanisms for assessing whether certain percentages of the construction process have been completed should be clear at the outset and the trigger for payments will correspondingly be clear.

FAQS

Can a foreigner own property in Thailand?
Yes, a foreigner can own property in Thailand, either a condo or a building but they cannot own land.

However, it is possible for a foreign individual to own land through a Thai limited company, or to lease the property up to 90 years with each method having its pro's and con's.

A foreigner is only able to own Condominiums as 100% freehold in their name. No other type of property can be owned this way. This is possible under the Condominium act which stipulates that a development with a Thai Condominium Licence may sell 49% of the saleable area of a given building to non-Thai nationals under a Freehold title, the remaining 51% of the given building may only be Leased for a term of 30 years or sold to Thai nationals as Freehold in the case that a foreigner has a Thai Limited company they could buy a condominium in Thailand in the company name as a Thai freehold title. Note that even if the development is a condominium block unless the developer has applied for and obtained a Condominium licence they cannot sell any unit as a Freehold unit to non-Thai nationals. Some villa developments in Thailand may advertise Freehold ownership but as this is not possible under Thai law it is recommended to read the small print as to what they actually mean by this and have it verified by a lawyer.

Does owning a property Freehold or otherwise in Thailand entitle the buyer to any special residence or long term visa?
Unfortunately, owning a property Freehold or otherwise does not entitle a non-Thai nation to any special long term visa. However long term visas can be obtained in the case that you find work in Thailand or are over 50 years old in which case you may apply for a retirement visa, other visas can be obtained such as education visas etc. It is recommended that you contact the Thai embassy in your home country or in Thailand for more details.

Can a foreigner ask for a mortgage loan from Thai financial institutions?
Foreigners generally cannot purchase properties in Thailand with a mortgage, however, most of the financial institutions in Thailand provide loans for real estate purchasing to Thais and Thai companies. It is common for a real estate developer to arrange for his customers to have a financing package from a financial institution.

In case you are a foreigner who is not working in Thailand and want to buy a condo unit, you will have to transfer the exact amount of that unit to a Thai bank account and state that the money is to be used to purchase a property.

In most real estate development projects, a down payment can be made in installments from 10 to 24 months. After the down payment has been paid, the sale contract will be made and the balance amount is paid through the loan which is financed from a financial institution.

What sales taxes are applicable in Thailand?
Land registration (transfer fee) of 2.0% of assessed value of the land.

Stamp Duty / Fee of 0.5% of the assessed value or the sale price - whichever is higher

Specific Business Tax of 3.3% of the assessed value or the sale price - whichever is higher - this will be applied to all sales by companies and to any private sales that occur within 5 years of the date of purchase

Withholding tax - In practice, this will work out to be lower than 2% of the price for low to medium value properties, and up to 3% for higher value properties. There are no set rules on who pays for which taxes and it are just another part of the bargaining process - make sure you discuss it with the agent and your own lawyer.

How to make payments for a property if you don't have bank account in Thailand?
Usually when you buy a new property in Thailand especially a Freehold Condominium, it is preferred that you pay directly from your account in your home country directly to the developers account as to obtain a Freehold title you will need to show the local land office that the money used to buy the property has originated from outside of Thailand this is provided by a Foreign Transaction Form (FTF) which is issued by the developers/Thai bank upon arriving in Thailand in the case that the transferred amount is 20,000 USD or over, these FTFs need to be kept and presented at the land office upon transfer of the title deed. It is very easy to open a bank account in Thailand and it is possible to pay for a property, even a Freehold property, from a Thai bank account after transferring money from abroad to your Thai bank account, again in the case for a Freehold condominium be prepared to provide evidence (FTFs) at the local land office to show that the money originated (before in came to your Thai account) from outside of Thailand. For leased property you are not required to provide such documentation.

What sales taxes are applicable in Thailand?
On all purchase/sale of property in Thailand there is a stamp Duty of 0.5%, a transfer fee of 2%, a business tax of 3.3% levied against an owner who has been in registered possession of the property less than 5 years, and withholding tax of 1% of the Government price or the declared value whichever is the higher. There is no Capital Gains Tax in Thailand.
For a 30 year leasehold property is 1.1% leashold registration tax of the lease rate.

Who is responsible for property taxes as mentioned above in Thailand?
It is usual in Thailand for the buyer and seller to share the costs of the transaction 50/50. There are no set rules on who pays these fees and taxes, and it is just another part of the bargaining process, as with all the other costs of the transfer of ownership.

What are the costs involved in making a property purchase in Thailand?
Purchase of the property. Lawyer fees . Lease or freehold transfer fees.Utilities / set-up (internet connection / TV subscription / Furniture, etc)

Is it possible to sell the property in the future?
Any property is possible to sell in the future, even leasehold property can be resold, in the case that a freehold property is resold and you would like to take the money back out of Thailand you will need the Foreign Transaction forms (FTF) to show to the bank that the money used to buy the property originally came from outside Thailand and then upon transferring the money back out of Thailand you will only be taxed on any profit you have made from the resale of the property and not on the total amount.

Land measurements in Thailand
Thai land measurements are a combination of imperial and metric measurement systems. Title deeds in Thailand include all land measurements using the Thai system and are also written in Thai, therefore it is beneficial for you to have a translation if you are thinking of buying a property. Below you'll find a comparison between the Thai and Western sytems which hopefully will help you gain a better understanding.

1 Wah = 2 Metres
1 Sq Wah is called a Talangwah = 4 Sqm
100 Talangwah = 1 Ngan = 400 Sqm
4 Ngan = 1 Rai = 1600 Sqm = 400 Talangwah
1 Acre = 4047 Sqm = approx 2.53 Rai
1 Hectare = 10000 Sqm = 6.25 Rai

What is a Foreign Transaction Form (FTF)?
A Foreign Transaction Form (FTF) is an official bank document issued by the receiving bank upon the receipt of foreign currency into your bank account in Thailand. You must request a Foreign Transaction Form from your bank when you are transfering funds to Thailand for the purpose of purchasing a condominium, apartment, land or house, and the document must specify that the transfer is solely for the purpose of purchasing a property/condominium. This is a very important document and you should retain copies so they can be used if you ever sell your property and wish to transfer the money out of Thailand again.

My wife is a Thai national, can she own the land?
Prior to 1998, any Thai woman who married a foreigner would lose her right to purchase land in Thailand. She could, however, still retain land that she owned prior to marrying the foreigner. However, the recent (1999) Ministerial regulation now allows Thai national's married to foreigners the right to purchase the land, but the Thai spouse must prove that the money used in the purchase of freehold land is legally solely theirs with no foreign claim to it. This is usually achieved by the foreign spouse signing a declaration stating that the funds used for the purchase of property belonged to the Thai spouse prior to the marriage and are beyond his claim.

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